Debt

3 Months Ended

Mar. 31, 2022

Debt

Debt

Note 5. Debt

In December 2020, the Company entered into a $20 million convertible debt financing agreement with Pontifax Medison Debt Financing (“Pontifax”), the healthcare-dedicated venture and debt fund of the Pontifax life science funds. Under the terms of the agreement with Pontifax, the Company had access to up to $20.0 million in convertible debt financing in three tranches, which will mature on June 15, 2025 and have an interest only period for the first two years with an interest rate of 8.47% on borrowed amounts and an interest rate of 1% on amounts available but not borrowed as an unused line of credit fee. The agreement is secured by a lien covering substantially all of the Company’s assets, other than intellectual property. The agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness, liens, including on intellectual property, guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental

changes. Affirmative covenants include, among others, covenants requiring us to protect and maintain our intellectual property and comply with all applicable laws, deliver certain financial reports, maintain a minimum cash balance and maintain our insurance coverage. Upon the closing of this transaction, the Company accessed the first tranche of $10 million, had the option to draw the second tranche of $5 million at any time during the initial 12 months of the loan and the third tranche of $5 million upon filing of the HyBryte™ NDA, subject to certain conditions. The Company elected to let both the second and third tranches expire as of December 15, 2021 and March 15, 2022, respectively. Interest expense incurred during the three months ended March 31, 2022 and 2021 was $208,849 and $221,178, respectively. Interest expense paid during the three months ended March 31, 2022 and 2021 was $223,901 and $221,178, respectively. The Company amortized $10,242 and $10,155 of issuance costs during the three months ended March 31, 2022 and 2021, respectively. Net deferred issuance costs of $133,605 and $143,847 have been recorded as a reduction of the carrying value of the $10 million convertible debt borrowed as of March 31, 2022 and December 31, 2021, respectively.

Pontifax may elect to convert the outstanding loan drawn into shares of the Company’s common stock at any time prior to repayment at a conversion price of $4.10 per share. The Company also has the ability to force the conversion of the loan into shares of the Company’s common stock at the same conversion price, subject to certain conditions.

Principal and interest payments due, assuming no conversion is as follows:

Year	Principal		Interest		Total
2022	$	—	$	638,151	$	638,151
2023		4,000,000		719,138		4,719,138
2024		4,000,000		380,338		4,380,338
2025		2,000,000		60,566		2,060,566
Total	$	10,000,000	$	1,798,193	$	11,798,193